What Went Wrong With Weatherization

Is government spending on weatherization a waste? We talked to economist and engineer Lester Lave about the merits of the Weatherization Assistance Program, about why this stimulus effort is off to such a slow start and why Europeans are so far ahead in home energy efficiency.

The Department of Energy's latest report on the Weatherization Assistance Program—a $5 billion piece of the now year-old Recovery Act—is disheartening. A mere $368.2 million dollars of the $5 billion have been spent and about 5 percent of units allocated funding across the nation have been completed. Of the top 10 most funded states, only two have completed more than 2 percent of the planned units (as you can see in the chart below), and there has been more time spent taking wage surveys, in accordance with the Davis-Bacon Act, than there has been caulking, stripping and insulating homes.

"In short," the report says, "the Nation has not, to date, realized the potential economic benefits of the $5 billion ... The job creation impact of what was considered to be one of the Department's most 'shovel ready' projects has not materialized. And, modest income home residents have not enjoyed the significant reductions in energy consumption and improved living conditions promised as part of the massive Recovery Act weatherization effort." This bureaucratic failure has churned up significant backlash to the administration's efforts. Some have called this program a stimulus waste; others are asking about the merit of weatherizing homes at all.

Is government spending on weatherization a waste? For Lester Lave, a professor of economics and engineering and director of the Green Design Initiative at Carnegie Mellon University, the heart of the program, at least, is on the right track. We got Lave on the phone and talked to him about the effects of weatherization on energy efficiency, how this stimulus program has been a bureaucratic nightmare and why Europeans are two panes more weatherized than Americans.

PM: Is the Recovery Act's Weatherization Program money well-spent?

Lester Lave: When you take a look at what's cost-effective in terms of energy savings in a house, weatherization comes first. All of the investigations of houses have shown that this is the most cost-effective thing. If you put people to work on this, paying them somewhere around $100 per day, then it's really cost-effective, it makes the house more comfortable, and it saves on heating bills and energy use.

That means caulking up all the leaks to the outside, making sure they're around every door and window, and making sure there is something that keeps the cold air from blowing in or hot air from blowing in. So, a couple of hours with a caulking gun and putting in some felt or metal strips does a tremendous amount to cut down on heat loss in a house. And the cost is essentially zippo. A tube of caulking costs almost nothing.

And how skilled do the workers have to be to take on weatherization? The answer is, really, not at all. In the old days, you would go around the house with a cigarette by the window and you would see that any place where the cigarette would blow horizontally, you would know there was a problem. So it's very inexpensive to do it and you don't need highly skilled people doing it.

PM: Why not promote energy efficiency through tax incentives that support DIY weatherization?

LL: First of all, there have been a number of plans where people are either given or pay a nominal amount for a home energy audit. The evidence on that is almost nobody does anything. You get the results of the home energy audit, you get these things where your payback period is and it turns out that more than 75 percent of things that get recommended never get done. It would be lovely if people did this themselves, but the evidence is that not much of it happens that way.

One of the problems in the past when you give out tax breaks—which are not very large—that basically the money gets wasted because the only people who do it are people who would have done it without the tax break. The money just isn't enough to induce people who wouldn't have done it to do it. Suppose that we now said to people that you get to deduct the cost of a caulking gun and a tube of caulk from your income tax—oh boy! Now, if what you're thinking about is changing your windows or something like that, that is generally not cost-effective quickly enough. The payback on those are generally 15 or 20 years. And so that's something that is altogether different. If you were anxious to get people to work, then it would be a reasonable thing to do, but it's not the most cost-effective weatherization stuff.

PM: There has been a lot of criticism over the speed of weatherization spending. Was a stimulus package the best way to implement this program?

LL:I think that economists look at whether you should be using fiscal or monetary policy when you are in a recession. This is an argument that has been going on for 50 years. The notion is that it takes a long time for the fiscal policy to have an effect. That is, Congress appropriates money for this or that and it takes a long time to get to spend it. There are just very long delays. Cynics say that a Congress winds up appropriating the money by the time the recession is actually over—which just helps fuel the next inflation. And that monetary policy can be done more quickly than that. I think that the Obama administration sort of realized that to begin with and were promising that these programs were going to go into effect immediately.

Government agencies aren't really set up to do things this quickly. You have all of these conflict-of-interest rules now, so before the government can do something, they have to put things out for bidding. When you put something out for bidding, you have to leave it out for 90 days and then you have to do a careful evaluation of all the bids there—it all takes forever.

PM: Should residential homes be top priority—what about businesses and factories?

LL: I think that when you look at factories and commercial businesses, someone pays for the energy and it comes into their consideration in how they can maximize profit. When you're looking at a residence, you have a lot of market imperfections there. The house was probably built by a speculative builder who was trying to minimize the sales price on the house and so probably bought the cheapest possible appliances, didn't bother to put insulation in the walls and didn't put more than single-paned glass in. If you are renting, then your landlord buys the appliances and he's probably going to buy the cheapest appliances around, because you pay for the energy. And so you have a number of market problems with the way we do things in the U.S. and in all of those, there is a lot of money to be saved by being a bit more sensible and getting rid of the bad decision-making that goes on to overcome the barriers of the energy efficiency.

PM: Why are European homes so energy-efficient?

LL: The upside and downside for Europeans is that energy there is expensive. People pay a lot more for energy and so they then have more energy-efficiency residences. They also tend to have smaller residences. You will often find two people in the U.S. living in a huge house, but you have to cool this huge house, which is extraordinarily expensive and inefficient. Americans have much larger houses than Europeans and they have to bear out all the energy costs of those.

What are the most effective steps toward home energy efficiency?

If you're looking at what's most cost-effective, then caulking up all the holes and putting some felt or metal around your doors so cold air doesn't blow in—that stuff is very cost-effective. The next most cost-effective thing is insulation in your attic. Hot air rises, so you lose a lot of heat through your attic. Putting insulation down there is inexpensive and it doesn't take any training to do it. And you're talking there, payback periods of maybe a couple of years. From there, you go on to insulation in the walls. That's more difficult to do. In order to get stuff in your walls, you can't get the normal insulation, you have to use blow-in insulation. And even with that, you can mess things up because you have to punch a hole in the wall every 18 inches. That can be a mess. That's got a payback period of 5 to 7 to 10 years. Then way down the line will be replacing your windows: If you have double-pane glass, then your payoff is from 15 to 20 years.

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